High-rent districts

Groups urge Congress to act on affordable housing

WASHINGTON (CBS.MW) - Lawmakers got an earful this week from a cross section of realty and community groups warning that a growing number of Americans are paying far more for housing than they can afford, a situation some consider a national crisis.

Industry representatives called on the federal government to provide additional incentives for the construction of affordable housing and to beef up mortgage programs targeted at low and moderate-income buyers in testimony before the housing subcommittee of the House Committee on Financial Services.

"This is a crisis that is deepening and that is affecting more and more of America's working families."
Mortgage banker John Courson

"In spite of a decade of economic growth ... there is a crisis in affordable housing. As would be expected, this crisis certainly affects the poorest of the poor, but it is not limited to low-income families. This is a crisis that is deepening and that is affecting more and more of America's working families," said John Courson, president of the Central Pacific Mortgage Co. in Folsom, Calif.

Courson's comments, testifying on behalf of the Mortgage Bankers Association of America, were echoed by six others appearing Thursday before the subcommittee in what chairman Marge Roukema, R-N.J., said would be a series of hearings on the topic.

"I hope to shed light on what obstacles are preventing certain sectors of the U.S. population from attaining homeownership and guide the way to an agreed upon approach for addressing the lack of affordable housing in so many of our communities," Roukema said.

Ownership up, but so are costs

The affordable housing question is particularly vexing because it is being asked even as the United States enjoys its highest rate of homeownership ever, near 68 percent. But there is increasing evidence that buyers and renters may be paying too high a price for their residences.

Robert Reid, executive director of the National Housing Conference and the Center for Housing Policy, said that in 1997 as many as 14 million Americans faced a "critical housing need," defined as either spending more than 50 percent of their incomes on housing or living in a seriously substandard unit.

A preliminary review of 1999 American Housing Survey data indicates an increase in those critical needs households of approximately 17 percent between 1997 and 1999, or 484,000 additional families, Reid said.

"Working families with critical housing needs defy the stereotypes that too often surround discussions of housing policy. Over half are homeowners. The number in the suburbs is greater than the number in the cities and the population of those with critical housing needs has grown to include teachers, police officers and firefighters, as well as service workers," he said.

But Kathryn Nelson, with the Office of Policy Development and Research in the U.S. Department of Housing and Urban Development, said HUD's analysis shows a shortage of affordable rental housing stock only for extremely low-income households, those earning 30 percent or less of an area's median income.

In 1999, 31.2 million rental units, or 85 percent of all the units in the country, had rents affordable to those with incomes below 80 percent of area median income, she said.

"Although different analyses view the problem from different angles, the end result is always the same. There is a considerable gap between what it costs to build and operate housing, and the incomes of people at the lower end of the economic spectrum," said Sheila Crowley, president of the National Low Income Housing Coalition.

"Expansion of housing stock that the lowest income households can afford will not only expand their housing options and reduce their housing cost burdens, it will cause the number of available units affordable for higher income households to increase at the same time. One argument could be made that the most cost effective investment in rental housing production resources would be for the lowest income households," she said.

One of the side effects of the long economic expansion has been a run-up in housing prices, only partially offset by lower mortgage interest rates.

"Every time I visit the neighborhoods ... I meet a constituent who is being priced out of his or her home. Each story is a reminder that even prosperity has a price," said Boston mayor Thomas Menino, who also serves as chairman of the United States Conference of Mayors Advisory Board.

"And for cities like Boston that price is high. We risk becoming a place where only the very rich and the very poor can afford to live," he said.

The median mortgage costs $1,625 per month in Boston, while the median rental on a two-bedroom apartment is $1,600, Menino said. Using the standard of affordability that no more than 30 percent of income go toward housing, even a computer programmer earning $63,000 annually would have a hard time finding affordable housing, let alone janitors or administrative assistants making one-third to one-half that salary, he said.

Possible solutions

In testimony prepared for the hearing, National Affordable Housing Management Association President Phil Carroll outlined a five-prong approach to "attack the roots of the affordable housing problem."

NAHMA recommends using preservation, project-based and tenant-based rental assistance, tax credits and bonds and incentives for the production of new affordable units.

The mortgage bankers urged lawmakers to improve and strengthen Federal Housing Administration programs, increase HUD's efficiency and enacting brownfields legislation that would make it easier to clean up and develop underused sites for residences.

Increasing the FHA loan limit for multifamily projects would also be a benefit, the National Association of Home Builders said. Those limits have not been increased since 1992 despite a dramatic rise in construction, land and other costs during that period, said Bob Nielsen, president of Reno-based Shelter Properties.

"These rising construction and other costs have resulted in a shortage of moderate cost or affordable rental units. Rent increases now exceed inflation in all regions of the country, and new affordable units are increasingly rare," he said.

The builders also think Congress should create a new multifamily housing production program that would meet the affordable rental housing needs of households with incomes between 60 percent and 100 percent of area medians.

"Federal housing policy for the past 20 years has been targeted almost exclusively to the needs of American families who make up our lowest income populations. While these families continue to need assistance, it is clearly time to recognize that public policy focused exclusively on the lowest-income Americans does not begin to address the scope of the problem," Nielsen said.

The builders estimate that at least 60,000 to 70,000 new multifamily units annually are needed for America to begin to meet the housing needs of working families, he said.

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